CFD (Contract for Difference) is a flexible trading instrument that allows investors to speculate on price movements without owning the underlying asset. It covers markets such as forex, stocks, indices, and commodities, offering opportunities in both rising and falling markets. While leverage can amplify returns, it also increases risk, making proper risk management essential.

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FAQ

What are CFDs?

A CFD, or contract for difference, is an agreement to exchange the difference between the opening and closing price of the position under contract, rather than buying and selling the underlying security outright.

Is there any difference between CFDs and investing?

Contracts for difference (CFDs) and investing both let you take market positions, but differ greatly: investing means owning assets, while CFDs are just speculation on price moves without ownership. CFDs allow margin trading and shorting, but carry higher risks.

Why trade CFDs rather than just buying stocks?

CFD trading lets you use leverage, requiring only a margin deposit instead of full asset value, which can amplify both profits and losses. You’re speculating on market price movements, not owning assets. CFDs also allow easy long (buy) or short (sell) trades, like in forex.

What are the risks of CFD trading?

Like FX trading, CFDs carry significant risks. You pay the spread on every trade, reducing profits and increasing losses. Fast market moves can quickly erode your position, and if the market moves sharply against you, your position may be closed and you must cover any losses.